Oracle 2010 Annual Report Download - page 40

Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our key operating business segments
and significant trends, including changes to our business as a result of our acquisition of Sun Microsystems, Inc. (Sun) in fiscal 2010. This overview is followed
by a summary of our critical accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our
reported financial results. We then provide a more detailed analysis of our results of operations and financial condition.
Business Overview
We are the world’s largest enterprise software company and a leading provider of computer hardware products and services. We develop, manufacture, market,
distribute and service database and middleware software; applications software; and hardware systems, consisting primarily of computer server and storage
products. Our products are built on industry standards and are engineered to work together or independently within existing customer information technology
(IT), including private and public cloud computing, environments. We offer customers secure, reliable, and scalable integrated software and hardware solutions
that are designed to improve business efficiencies and more easily adapt to an organization’s unique needs, at a lower total cost of ownership. We seek to be an
industry leader in each of the specific product categories in which we compete and to expand into new and emerging markets.
We believe our internal growth and continued innovation with respect to our software, hardware and services businesses are the foundation of our long-term
strategic plans. An important element of our continued innovation and product strategy is to focus the engineering of our hardware and software products to make
them work together more effectively and deliver improved computing performance, reliability and security to our customers. Our Oracle Exadata Database
Machine and Oracle Exalogic Elastic Cloud products exemplify this strategy and are currently two of our most important products. Both products combine
certain of our hardware and software offerings to provide an engineered system that increases computing performance relative to our competitors’ products,
creating time savings and operational cost advantages for our customers. In fiscal 2011, 2010 and 2009 we invested $4.5 billion, $3.3 billion and $2.8 billion,
respectively, in research and development to enhance our existing portfolio of products and services and to develop new products and services.
We also believe that an active acquisition program is an important element of our corporate strategy as it strengthens our competitive position, enhances the
products and services that we can offer to customers, expands our customer base, provides greater scale to accelerate innovation, grows our revenues and
earnings, and increases stockholder value. In recent years, we have invested billions of dollars to acquire a number of companies, products, services and
technologies that add to, are complementary to, or have otherwise enhanced our existing offerings. We expect to continue to acquire companies, products,
services and technologies in furtherance of our corporate strategy.
We are organized into three businesses—software, hardware systems and services—which are further divided into seven operating segments. Each of these
businesses and operating segments has unique characteristics and faces different opportunities and challenges. Although we report our actual results in U.S.
Dollars, we conduct a significant number of transactions in currencies other than U.S. Dollars. Therefore, we present constant currency information to provide a
framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. An overview of our three businesses
and seven operating segments follows.
Software Business
Our software business, which represented 68%, 77% and 81% of our total revenues in fiscal 2011, 2010 and 2009, respectively, is comprised of two operating
segments: (1) new software licenses and (2) software license updates and product support. On a constant currency basis, we expect that our software business’
total revenues generally will continue to increase due to continued demand for our software products and software license updates and product support offerings,
including the high percentage of customers that renew their software license updates and product support contracts, and due to our acquisitions, which should
allow us to grow our profits and continue to make investments in research and development.
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Source: ORACLE CORP, 10-K, June 28, 2011 Powered by Morningstar® Document Research℠